Wednesday February 21, 2018

Finances

Lockheed Martin Beats Expectations

Lockheed Martin (LMT) announced its fourth quarter and full-year results on Monday, January 29. The aerospace and defense company reported numbers that were in line with Wall Street's estimates.

The company reported a revenue increase of 10% to $15.14 billion in the fourth quarter. This exceeded Wall Street's predictions of $14.75 revenue in the quarter. For the full year, revenue increased to $51.05 billion, up from $47.25 billion.

"We delivered outstanding performance as we completed 2017, which enabled us to end the year with strong sales growth, $6.5 billion of cash from operations and a backlog of nearly $100 billion, while also returning over $4.0 billion to our shareholders," said Lockheed Martin Chairman, President and CEO Marillyn Hewson. "Looking ahead to 2018, we remain focused on meeting commitments to customers, pursuing new business growth opportunities, investing in innovative solutions to prepare for the future, and returning value to our shareholders."

Lockheed Martin experienced a net loss in the fourth quarter of $642 million, or $2.25 per share. Last year at this time, the company posted earnings of $988 million, or $3.35 per share. On an adjusted earnings per share basis, excluding a one-time charge related to tax reform, the company earned $4.30 per share, which is higher than the expected $4.07 per share.

Lockheed Martin's Missiles and Fire Control business reported a 30.5% increase in revenue. The company reported revenue increases of 14.2% for its Rotary and Mission Systems and 11.8% in Aeronautics. Space revenue fell 11.9% in the fourth quarter. The company expects full-year revenue for 2018 between $50 and $52.5 billion.

McDonald's Reports Strong Growth

The company reported that revenue decreased 11% year-over-year during the fourth quarter to $5.34 billion. For the full year, revenue decreased 7% to $22.82 billion.

"2017 was a strong year for McDonald's as customers responded to the many ways we are making their experience more convenient and enjoyable," said McDonald's President and CEO Steve Easterbrook. "We served more customers more often, achieved our best comparable sales performance in six years, gained share in markets around the world and made tremendous progress with growth platforms such as delivery, mobile order and pay and Experience of the Future."

McDonald's reported net income of $698.7 million, or $0.87 per share, in the fourth quarter. Last year in the same quarter, the company posted earnings of $1.193 billion, or $1.44 per share. Full-year net income increased 17% to $5.192 billion, or $6.37 per share.

McDonald's global same-store sales grew 5.5% in the fourth quarter, which is its largest increase in six years. Domestic same-store sales increased 4.5% in the quarter, beating analysts' predictions of 4.3%. The company attributes the growth to successful promotions throughout the year and new menu items.

McDonald's Corp. (MCD) shares ended the week at $169.26, down 5% for the week.

Facebook Reports Earnings

Facebook, Inc. (FB) announced its quarterly and full-year earnings on Wednesday, January 31. The global social network's stock pushed toward record highs after the earnings report was released.

The company reported that revenue increased 47% during the fourth quarter to $12.97 billion. This exceeded the $12.5 billion predicted by analysts. For the full year, the company reported a 47% year-over-year increase in revenue to $40.65 billion.

"2017 was a strong year for Facebook, but it was also a hard one," said Facebook founder and CEO Mark Zuckerberg. "In 2018, we're focused on making sure Facebook isn't just fun to use, but also good for people's well-being and for society. We're doing this by encouraging meaningful connections between people rather than passive consumption of content."

Facebook reported net income of $4.27 billion, or $1.44 per share. For the full-year, net income was $15.93 billion, or $5.39 per share. Tax reform reduced the earnings per share by $0.77 for both the fourth quarter and full-year.

The company modified its content in users' News Feeds, which caused a decline in the amount of time users spent on Facebook. Facebook's daily and monthly active users increased 14% in both categories year-over-year. Facebook's stock fell immediately following the earnings report release, but recovered and exceeded its previous mark during the company's call with investors.

The Dow started the week of 1/29 at 26,584 and closed at 25,521 on 2/2. The S&P 500 started the week at 2,867 and closed at 2,762. The NASDAQ started the week at 7,484 and closed at 7,241.

Treasury Yields Continue Upward Trend

U.S. Treasury yields rose early in the week in response to economic data and the conclusion of the Federal Open Market Committee (FOMC) meeting. The yield on the 10-year Treasury note reached a four-year high in response to the jobs report released Friday.

On Monday, the 10-year U.S. Treasury note rose to 2.72%. The 10-year yield held steady mid-week following the release of better-than-expected consumer confidence data.

"We start the week with bonds under pressure again," stated Kevin Giddis, Head of Fixed Income Capital Markets at Raymond James. "While the pace of the rise in yield in the short end of the yield curve isn't that surprising since the Fed's bias remains to tighten, what is more surprising is how quickly the yield on the 10-year note has shot up. It is almost as if the anticipation of inflation has been replaced with the certainty of it."

On Wednesday, the Fed released its monetary policy statement at the conclusion of the latest FOMC meeting. The statement predicts that inflation will rise and stabilize around the 2% target, while leaving interest rates unchanged. After the statement was released, the 10-year Treasury note yield increased to 2.75%.

"The changes to the [FOMC policy] statement were fairly modest, but the markets didn't really need much further encouragement," said Michael Pearce, Senior U.S. Economist at Capital Economics. "Fed funds futures have risen almost continuously since last September and, at this stage, a March rate increase is pretty much fully priced in."

On Friday morning, the U.S. Labor Department released its jobs report for the month of January. The report detailed 200,000 jobs were added with unemployment remaining steady for the fourth consecutive month at 4.1%. Economists had predicted 180,000 jobs would be added. Following the strong economic data, Treasury yields were up with the 10-year yield reaching 2.84%.

The 10-year Treasury note yield finished the week of 1/29 at 2.85%, while the 30-year Treasury note yield was 3.10%.

Mortgage Rates Continue to Rise

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, February 1. The report revealed the 15 and 30-year fixed mortgage rates moved higher than last week's averages.

The 30-year fixed rate mortgage averaged 4.22% this week. This is an increase from last week when it averaged 4.15%. Last year at this time, the 30-year fixed rate mortgage averaged 4.19%.

This week, the 15-year fixed rate mortgage averaged 3.68%. This was higher than last week's average of 3.62%. The 15-year fixed rate mortgage averaged 3.41% one year ago.

"The 30-year fixed rate mortgage is up over a quarter of a percentage point (27 basis points) from the first week of the year," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "30-year fixed mortgage rates have increased for four consecutive weeks and are now slightly above where they were last year at this time."

Based on published national averages, the money market account finished the week of 1/29 at 0.83%. The 1-year CD finished at 1.84%.